Federal Reserve (The Fed) Chairman Jerome Powell indicated that the U.S. central bank is likely to cut interest rates by another 0.25% later this month, even though the government shutdown has significantly limited The Fed’s ability to assess economic conditions.

Powell, in his speech on Tuesday (October 14, 2025) at the annual National Association for Business Economics (NABE) meeting, said that the economic outlook appears unchanged since the policymakers’ September meeting, when they lowered interest rates and projected two more cuts for this year.

"The October rate cut is certain," said Julia Coronado, founder of MacroPolicy Perspectives and former Fed economist. "Nothing has changed the view that there remains downside risk in the labor market."

Powell repeatedly highlighted the slowing pace of job hiring and emphasized that this trend could weaken further.

"You are at a point where further declines in job openings could impact unemployment," Powell said during a Q&A session after his speech. "We have seen an extraordinary period where unemployment fell quickly, but I think there will come a point where unemployment begins to rise."

Market expectations for the October rate cut shifted slightly after Powell’s statement. According to federal funds futures contracts, investors see nearly a 100% chance of a rate reduction.

The Fed’s September rate cut was the first since December, following a sharp slowdown in hiring over the summer.

Nevertheless, the unemployment rate remains relatively low at 4.3% in August. The Department of Labor postponed the release of September payroll data due to the shutdown but has recalled staff to prepare the September Consumer Price Index (CPI) data, which is scheduled for release at the end of the month.

"Currently, the labor-side risks of the mandate are rising," said Yelena Shulyatyeva, senior U.S. economist at the Conference Board, during NABE. "This will influence decisions in the near term."

The Fed is scheduled to meet again on October 28-29. Last month, the median projection of 19 policymakers indicated two more rate cuts this year, though nine officials judged that one or no cuts would be more appropriate.

KPMG Chief Economist Diane Swonk noted that differences among policymakers make Powell more cautious in setting next year’s interest rate direction.

"It signals that 'we actually don’t know where our long-term policy is heading,'" she said.

The lack of complete official economic data has heightened concerns that The Fed will not obtain a clear picture of the economy, increasing the risk of policy errors.

This is an extremely challenging period for The Fed, which must operate without full data. Its dual mandate to stabilize prices and maximize employment creates opposing pressures. The labor market is slowing, while inflation remains above the central bank’s 2% target.

Powell stated that he and his colleagues are seeking alternative data sources from the private sector, but stressed the importance of government data, calling it the “gold standard.”

"We do not expect to replace the data we are missing," Powell said. "We are beginning to lose this data, especially for October. If this persists, it will not be collected, and that could be more challenging."

Additionally, Powell signaled that the Fed may halt the reduction of its balance sheet in the coming months—a critical step to maintain liquidity in the overnight funding markets.